We seem to be on track to shift from the well-proven ‘polluter pays’ approach to carbon emissions (and other forms of pollution) to a ‘pay the polluter’ approach, using public funds. The government will limit how much will be spent, so we may not even meet our international emission reduction obligations, let alone our equitable share of abatement as estimated based on science.
Luckily the combination of grassroots action, technology change and the structural changes being driven by our over-valued Australian dollar is damping emission growth to some extent. And, under international and local pressure, the government may become desperate enough to reform energy markets to promote energy efficiency and even stop its attacks on renewable energy.
There are some potential positives from the shift away from using the carbon price as the ‘silver bullet’ to fix everything. As I explained in my last column, this led to serious cuts in energy efficiency programs, failed to confront our deeply flawed electricity market and disempowered voluntary local action by households, businesses and local and state governments.
However, a carbon price is a basic element of any effective climate response. It provides a (fairly imperfect) signal to emitters and investors, while also generating revenue to support adaptation, innovation and stronger abatement – forms of ‘direct action’.
Developing countries and energy
I recently came across a very interesting paper published by the World Academy of Sciences for the Advancement of Science in Developing Countries (Sustainable Energy for Developing Countries 2008).
Two points really stood out. First, the $137 billion increase in developing country oil import costs in 2005 exceeded the value of all official aid ($84 billion) to those countries. So if we can help them to reduce oil dependence through sustainable energy strategies, we can improve their wellbeing while also reducing pressure on oil prices and cutting greenhouse gas emissions.
Second, to provide access to the 1.5 billion people currently without basic electricity services would increase global electricity consumption by only around half a percent. Since most of these people are in rural areas, small-scale renewable energy systems and energy efficiency are the most sensible solutions.
A major sustainable energy transition could transform their lives and help to reduce sustainable energy costs for the rest of humanity. Australia could also do with a strategy to reduce oil dependence. The Bureau of Resources and Energy Economic’s latest estimate is that by 2035 our net oil import bill would be over $40 billion and, by 2050, over $50 billion each year (assuming $100/barrel).
Some personal experiences and their implications for policy
I finally decided to replace my early 1990s fridge and old (but still comparatively efficient) TV in recent months.
The TV replacement was easy. I used the energyrating.gov.au website, then tweaked the brightness of the display to cut energy use to 25 watts for an 80cm TV. My old 51 cm TV (by far the most efficient available when I bought it) used 55 watts.
The fridge was a different matter. I have been waiting since 2004 to buy the European A++ fridge I’d discovered being made in Turkey. I finally gave up and chose the most efficient 320 litre fridge available in Australia, rated at 300 kWh per year after finding I could not buy a similarly sized A+++ fridge made by the same manufacturer that’s available in Europe (see www.topten.eu). It is rated at 172 kWh per annum (around 210 kWh for Australian test conditions). The manufacturer’s Australian representative told me they had no plans to sell that more efficient unit (with a bigger freezer) here.
My new fridge is still quite impressive. It has a variable-speed compressor, hydrocarbon refrigerant and eutectic panels in the freezer that stabilise its temperature. But why am I condemned to waste energy because I live in Australia?
In comparing my new fridge’s performance with the old one, I have found that its efficiency and variable-speed compressor cut my peak demand by around 100 watts. Using the Productivity Commission’s recent estimates, this saves my electricity suppliers around $30 each year in infrastructure investment. It’s saving me around $75.
Since I had to buy a new fridge anyway, and I paid no more than I would have for a less efficient one, I’m avoiding CO2 emissions at a cost of minus $300/tonne! My old fridge went off to the Phoenix Fridge recycling program, where its refrigerant CFCs can be recovered and its components recycled.
But I have reduced my utilisation of the existing electricity supply assets, depriving their owners of revenue. Should I be charged more for this? See below.
AEMC contempt for 2 million voters
The Australian Energy Markets Commission has released a new report. In the introduction, the report states: “Effective consumer participation can contribute to more efficient markets…” AEMC should check its economics text books. Informed, empowered consumers are fundamental to the efficient operation of markets. Yet after 15 years, it’s still not happening.
The report argues that owners of rooftop PV should be charged more for reducing utilisation of energy supply assets. Can it point to any other market where this happens? Do gas suppliers compensate the electricity industry when people install a gas heater to replace an electric one? Those who install and use large air conditioners and halogen lights have benefited from large subsidies for many years, yet no action has been taken to make them pay.
The AEMC is taking on over two million PV-owning voters on behalf of the incumbent businesses. When will our political leaders in COAG and the Standing Committee on Energy and Resources step in to sort them out?
Will a ‘thin pipe’ approach help electricity networks to survive?
The latest idea to help electricity network owners adjust to our rapidly changing technologies is to use low-capacity wires combined with distributed energy storage, generation and smart controls – instead of building capacity to supply peak demand.
This is similar to the ‘green grid’ approach that was proposed by solar identity Dale Butler at the 1993 Australian Solar Conference for fringe-of-grid electricity. It sounded really sensible to me when I originally heard it. It still does, especially given cost reductions and technology improvements.
A typical all-electric home might use 10,000 kWh a year – if it could smooth its demand perfectly over time, it would only need supply capacity of 1.2 kilowatts: most homes have supply cables with capacity of 10 to 20 kilowatts.
My latest calculations suggest a three-person best-practice all-electric home with all ‘mod cons’ could now use around 2000–2500 kWh per year. That’s a ‘smoothed’ demand of under 300 watts.
But is this the salvation of network owners? The answer depends on many variables. If a cluster of consumers can share back-up generation and storage, they may not need the grid at all. This back-up generation could be a small cogeneration unit, a fuel cell or output from hybrid cars.
So the challenge for network owners is to diversify their activities. Their market position will be sensitive to policy on whether non-networks can transfer power across property boundaries, or the capacity of smart businesses to find ways of getting around such limits by, for example, moving fully charged batteries to where electricity is needed.
In low-density areas on the fringe of networks, the ‘thin pipe’ will compete with stand-alone energy solutions. In existing areas, it may not be a lot cheaper to maintain a thin-pipe solution instead of a higher capacity one. But changes such as increasing development density and depreciation of network asset values may allow network owners to develop viable business models.
Apartment buildings, offices, retail and small-to-medium industry may provide ongoing markets for network owners. But they are also potential competitors if they gain the right to sell power to neighbours. Nothing is clear cut in today’s rapidly changing situation.
Alan Pears has worked on sustainable energy issues since the late 1970s. He is one of Australia’s best recognised and most highly awarded commentators on sustainable energy and climate issues. He teaches part time at RMIT University and is co-director of Sustainable Solutions, a small consultancy.